No Capitulation Yet

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Where are the bid-wanted situations? Where are the distressed sellers? Why don't they make themselves known? Let me explain in plain English what I am talking about.

When a small seller wants to sell something, he just sells it. Period. End of story. But when someone owns a lot of a stock, and knows how to trade, he goes to a position house (any of the major firms) and says: "Here is the situation. I own 500,000

National Gift Wrap

, a stock that trades 50,000 shares on a busy day, and I want out. The last sale was at $30. What will you bid me?"

The trader on the other line checks the bodies, sees who is interested, looks around, tries to figure out a price and makes a bid. The bid will be low. A loss will be taken. Maybe as much as $3 per. And life goes on.

Nobody is doing this!!!!!

Either the mutual funds refuse to capitulate and won't hit that discount bid, or the investment firms aren't willing to make those bids because NOBODY WANTS TO BE LONG NATIONAL GIFT WRAP.

Things have to "trade" to be healthy. Stocks must go from weak hands to strong hands.

That's what is called a bottom. I stay close to this part of the equation all the time. I have cash and am waiting for the National Gift Wrap prints, prints that I know will hold because they are at an attractive price. But I NEVER GET A CALL FROM ANY DESK SHOWING ME DISTRESSED MERCHANDISE.

In 1994 at the bottom I got discounted merchandise shown to me constantly. In 1990, at the bottom, all I did was pick among the rubble.

There is no rubble to pick from. Which is why the

Russell

index keeps going down. Funds will capitulate. They always do. Stay ready for when they do. But don't take them out of stock before the capitulation -- or you will be the one to capitulate!!!

National Gift Wrap is a private company my Dad owns and does not trade. I specifically NEVER use a real small-cap stock in this kind of example for fear that it will affect the price, and, unlike brokers and promoters, my goal is not to move stocks but to show you what is going on.

James J. Cramer is manager of a hedge fund and co-chairman of TheStreet.com.

Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to comment on his column by sending a letter to TheStreet.com at

letters@thestreet.com.